Personal Finance

What to know about Harris’ affordable housing economic proposals

Published

8 months ago

August 20, 2024

Business Finance News

Democratic U.S. presidential candidate, Vice President Kamala Harris, speaks at an Aug. 10 campaign rally in Las Vegas.

Justin Sullivan | Getty Images News | Getty Images

Supply is housing policy’s ‘bipartisan sweet spot’

“The bipartisan sweet spot around the housing affordability challenges that we have today is on increasing supply,” said Dennis Shea, executive director of the Bipartisan Policy Center’s J. Ronald Terwilliger Center for Housing Policy.

Ever since the foreclosure crisis, a major period of property seizures in the U.S. between 2007 and 2010, there have been far fewer new single-family homes and multi-family rental buildings under construction, said Janneke Ratcliffe, vice president of the Housing Finance Policy Center at the Urban Institute, a non-profit think tank in Washington, D.C.

There’s “a more acute shortfall” when it comes to affordable homes, she said, whether for renters looking for quality rental units or first-time buyers looking for their first home.

Housing prices rise despite more supply: Here's why

To get to those 3 million new units, a Harris-Walz administration would introduce a “first-ever tax incentive” for home builders who build starter homes sold to first-time homebuyers, according to the proposals unveiled last week.

The initiative would complement the Neighborhood Homes Tax Credit, according to the announcement. A bill pending in Congress called the Neighborhood Home Investment Act, which would promote the creation and rehab of starter homes for sale in distressed communities, would create that tax credit, said Shea.

“It would create this tax credit, and that has strong bipartisan support,” he said.

My conclusion is that [Harris’] housing plan would be worse than doing nothing.

Edward Pinto

senior fellow and codirector of the American Enterprise Institute’s Housing Center

Former President Donald Trump has also talked about ways to increase housing supply as part of his presidential campaign proposals.

“We’re going to open up tracks of federal land for housing construction,” Trump said in an Aug. 15 press conference. “We desperately need housing for people who can’t afford what’s going on now.”

But Edward Pinto, senior fellow and codirector of the American Enterprise Institute’s Housing Center, said it’s “much, much harder” for the government to pass “supply-side proposals,” compared to efforts that generate demand by making homebuying easier for consumers.

“My conclusion is that [Harris’] housing plan would be worse than doing nothing,” he said.

‘It’s hard to define what a starter home is’

It will be important for Harris to clarify what she means by “starter home,” said James Tobin, CEO of the National Association of Home Builders.

“It’s hard to define what a starter home is,” said Tobin, as underlying costs make it hard to keep building expenses low.

“In most markets in the country, it’s hard to build to that first-time home buyer because of labor costs, land costs, borrowing costs for a builder, and then material cost,” he said.

Harris economic plan will try to 'tell story' combating inflation criticism

Defining a range of price points for a starter home will also be important, as it may vary widely across different markets, said Tobin.

“In California, a starter home might cost seven or $800,000, but in the South … it might only be $250,000 or $300,000,” he said.

The $40 billion innovation fund seems ‘very high’

The list of Harris’ proposals also includes a $40 billion innovation fund. The money would empower local governments to fund local solutions to build housing, as well as support local solutions to build housing.

Yet some experts are skeptical it will fulfill the intended goal.

“The federal government doesn’t have a whole lot of authority over what happens at the local level,” said Fairweather. “It’s up to the local planning commissions whether they’re going to allow for more housing in order to get that [innovation fund] money.”

“But time and time again, locals and local governments, local homeowners ignore incentives because they’re so resistant to building more housing,” said Fairweather.

Additionally, the $40 billion housing innovation fund may be too high of a cost, making it unlikely to receive bipartisan support, said Shea: “I don’t know if the market could bear that price tag in Congress.”

Aid for first-time home buyers has less support

Harris hopes to provide $25,000 down-payment assistance to first-time homebuyers who have paid rent on time for two years, with more generous support for qualifying first-generation homeowners.

The proposal stems from an idea the Biden-Harris administration presented earlier this year, which called on Congress to implement $25,000 in down-payment assistance exclusively for 400,000 first-generation buyers (or first-time buyers whose parents weren’t homeowners) and a $10,000 tax credit for first-time buyers.

Harris’ blueprint would apply to all first-time buyers and broaden the reach to more than 4 million qualifying applicants over four years.

But “there’s just not a lot of bipartisan support,” said Shea.

During an Aug. 16 appearance on Fox Business, Sen. Tim Scott, R-S.C., said Harris’ $25,000 down payment assistance “will only make the demand higher with the supply not moving, which means that prices will go up, fewer people are going to be able to afford it.”

“And frankly, unless they’re going to embed financial literacy in any program, it only means there will be a higher level of default,” said Scott.

To help renters, Harris addressed two pending pieces of legislation. The Democratic presidential nominee called on Congress to pass the Stop Predatory Investing Act, a bill that calls for removing key tax benefits for those who own 50 or more single family properties. This initiative would curtail major investors from buying up large sums of single-family rental homes.

Meanwhile, the Preventing the Algorithmic Facilitation of Rental Housing Cartels Act would crack down on companies who use tools to fix market rent prices.

Personal Finance

Consumers are making different financial choices in response to tariffs

Published

16 hours ago

April 22, 2025

Business Finance News

The Apple Fifth Avenue store in New York, U.S., on Monday, Feb. 24, 2025.

Michael Nagle | Bloomberg | Getty Images

Even as a pause on reciprocal tariffs has been put into effect, consumers are already anticipating the pressures of higher prices.

A majority of Americans — 85% — have concerns about the tariffs, according to a new NerdWallet survey of more than 2,000 individuals conducted this month.

Among top concerns of consumers is that the new policies will impact their ability to afford necessities and that the U.S. economy will fall into a recession.

Meanwhile, cracks in consumer confidence are showing elsewhere.

The University of Michigan’s consumer survey shows sentiment has dropped by more than 30% since December among persistent worries of a trade war. The latest reading for April fell 11% from the previous month, which was worse than expected.

The worries are not unfounded, experts say. Tariffs could cost the average household $3,800 per year, the Budget Lab at Yale University estimates.

“Most Americans are worried about tariffs, and it’s actually impacting their spending plans,” said Kimberly Palmer, personal finance expert at NerdWallet.

In the next 12 months, a significant portion of individuals surveyed by NerdWallet plan to make changes to their spending habits, with a notable shift towards saving more.

Specifically, 45% plan to spend less on non-necessities, 33% intend to spend less on necessities, and 30% plan to save more money in an emergency fund. However, a smaller percentage, 14%, anticipate paying less on their debts.

The tariffs come as consumers were already struggling to pay for groceries and other essentials amid higher prices, according to Palmer.

“These tariffs are adding to that financial stress and basically forcing people to make some difficult decisions,” Palmer said. That includes scaling back on travel and planned big-ticket purchases like a car.

Emergency savings is ‘most important’ priority: expert

New economic pressures may prompt income to be eaten up by rising prices and competing interests, according to Stephen Kates, a certified financial planner and financial analyst at Bankrate.

Consumers may have to make tough choices between saving, investing and paying down debts.

“If you have nothing [saved], start with the emergency fund,” Kates said.

Individuals should strive to have at least one month of essential expenses set aside at the very minimum, Kates said. Ideally, that would be more like three to six months’ living expenses, he said.

James Gorman: Trade policy has definitely been a shock and will affect how the Fed behaves

That way, if a job or other income loss happens, consumers can protect themselves from going into debt, Kates said.

For individuals who already have racked up debt balances, prioritizing emergency savings still makes the most sense, Kates said. And if you’re choosing between emergency savings or saving for retirement, emergency savings should still be the highest priority, he said.

To be sure, that doesn’t necessarily mean individuals should ignore their other goals.

Kates discussed using what is called the “debt avalanche” strategy.

The focus is on paying down the debt with the highest interest rate first — while paying minimums on the others — then move on to the account with the next highest rate, and so on. That can provide an immediate return and help free up money in household budgets, Kates said.

When it comes to retirement savings, it’s important to make sure individuals are contributing enough to take advantage of a match, if their employer offers one, he said.

Personal Finance

Trump said tariff revenue could replace the income tax. What experts say

Published

18 hours ago

April 22, 2025

Business Finance News

In this aerial view a forklift drives among stacked shipping containers in Hamburg Port on April 15, 2025 in Hamburg, Germany.

Sean Gallup | Getty Images

Tariff tax base is ‘a lot smaller’ than income tax

Some policy experts have questioned how much revenue the duties could bring in, compared to the federal income tax.

“The tariff tax base is a lot smaller than the income tax base,” Kimberly Clausing, a senior fellow at the Peterson Institute for International Economics, told CNBC.

In 2023, the U.S. imported $3.1 trillion of goods. By comparison, the government levied tax on more than $20 trillion in incomes, according to a report she co-authored last summer.

White House trade adviser Peter Navarro in late March estimated tariffs could raise roughly $600 billion a year.

But that figure “is not even in the realm of possibility,” Mark Zandi, chief economist at Moody’s, told CNBC earlier this month. “If you get to $100 billion to $200 billion, you’ll be pretty lucky.”

To compare, the IRS has collected $1.14 trillion in individual income taxes for fiscal year 2025 through March 31, according to Treasury data.

“Tariff rates would have to be implausibly high on such a small base of imports to replace the income tax,” Clausing co-wrote in the Peterson Institute for International Economics report.

Plus, at higher tariff rates, people will buy fewer imported goods, which reduces revenue, Clausing told CNBC: “That’s part of the point of the policy.”

The Trump administration did not respond to CNBC’s request for comment.

Consumer behavior influences tariff income

As tariff rates increase, other factors can decrease how much revenue the U.S. ultimately collects, experts say.

“The administration seems to think that every time it raises the tariff rate that it can collect more revenue,” Tax Foundation’s Durante said. “And that’s not always the case.”

Direct tariff revenue is lowered by behavioral and other economic factors, Durante detailed in a report earlier this month.

Seeking safety amid market volatility: Strategies to keep your money safe

The Tax Foundation estimates that a 10% universal tariff would raise $2.2 trillion through 2034. However, the same tariff would reduce U.S. gross domestic product by 0.4%, which impacts revenue.

The International Monetary Fund on Tuesday reduced 2025 U.S. growth projections to 1.8% from 2.7% based on trade tensions.

Personal Finance

What student loan borrowers need to know about involuntary collections

Published

20 hours ago

April 22, 2025

Business Finance News

U.S. Secretary of Education Linda McMahon smiles during the signing event for an executive order to shut down the Department of Education next to U.S. President Donald Trump, in the East Room at the White House in Washington, D.C., U.S., March 20, 2025.

Carlos Barria | Reuters

In a Wall Street Journal op-ed, U.S. Secretary of Education Linda McMahon explained the U.S. Department of Education’s decision to restart collections on federal student loans that are in default — and what comes next for Federal student loan borrowers who are behind on their bills.

“On May 5, we will begin the process of moving roughly 1.8 million borrowers into repayment plans and restart collections of loans in default,” McMahon wrote in the op-ed Monday.

“Borrowers who don’t make payments on time will see their credit scores go down, and in some cases their wages automatically garnished,” McMahon wrote.

Next steps for borrowers

Federal student loan borrowers in default will receive an e-mail over the next two weeks making them aware of this new policy, the Education Department said.

These borrowers should contact the government’s Default Resolution Group to make a monthly payment, enroll in an income-driven repayment plan, or sign up for loan rehabilitation.

The Education Department said it is extending the Federal Student Aid call-center operations with weekend hours as well updating a “loan simulator” to help borrowers calculate their repayment plans. There is also an artificial intelligence assistant, dubbed Aidan, to help with a financial strategy.

“We are committed to ensuring that borrowers are paying back their loans, that they are fully supported in doing so, and that colleges can’t create such a massive liability for students and their families, jeopardizing their ability to achieve the American dream,” McMahon wrote.

‘Be proactive’

Those borrowers who are behind in their required payments should avoid being placed in default by taking advantage of various options currently available to them to manage their education loans, advised Kalman Chany, a financial aid consultant and author of The Princeton Review’s “Paying for College.”

“Be proactive,” he said. “Best to take care of this as soon as possible, as the loan servicers’ and the U.S. Department of Education’s customer support will get busier the closer it gets to May 5.”

The Education Department has not collected on defaulted student loans since March 2020. After the Covid pandemic-era pause on federal student loan payments expired in September 2023, the Biden administration offered borrowers another year in which they would be shielded from the impacts of missed payments. That relief period officially ended on Sept. 30, 2024.

“President Biden never had the authority to forgive student loans across the board, as the Supreme Court held in 2023,” McMahon wrote. “But for political gain, he dangled the carrot of loan forgiveness in front of young voters, among other things by keeping in place a temporary Covid-era deferment program.”

McMahon said restarting collections of loans in default was not meant “to be unkind to student borrowers.” Rather, the new policy intended to protect taxpayers. “Debt doesn’t go away; it gets transferred to others,” she said. “If borrowers don’t pay their debts to the government, taxpayers do.”

Currently, around 42 million Americans hold federal student loans and roughly 5.3 million borrowers are in default.

“It really is time to start repaying again,” Maya MacGuineas, president of the Committee for a Responsible Federal Budget said in a statement. “While a short repayment pause was justifiable early in the pandemic, that was five years ago — and it makes no sense today.”

President Donald Trump in March signed an executive order aimed at dismantling of the Education Department after nominating McMahon for Education secretary. Trump suggested that she would help gut the agency. As part of this overhaul, federal student loan management was then shifted to the Small Business Administration.

Along with changes to the student loan system, the Trump administration revised some of the Department of Education’s income-driven repayment plans, which put at-risk borrowers in “economic limbo,” according to Mike Pierce, executive director at the Student Borrower Protection Center.

“For five million people in default, federal law gives borrowers a way out of default and the right to make loan payments they can afford,” Pierce said in a statement. “Since February, Donald Trump and Linda McMahon have blocked these borrowers’ path out of default and are now feeding them into the maw of the government debt collection machine.”

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